Suppose Bank ABC Has a Target Reserve Ratio of 10

question 33

Multiple Choice

Suppose Bank ABC has a target reserve ratio of 10 percent, no excess reserves, and it receives a new deposit of $500 000. This bank will initially expand its loans by

• A)$500 000.
• B)$5 million.
• C)$50 000.
• D)$450 000.
• E)$4.5 million.

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Definitions:

Critical Value

A point on the scale of a test statistic beyond which we reject the null hypothesis; it depends on the chosen significance level.

Test Statistic

A value calculated from sample data during a hypothesis test.

Null Hypothesis

A hypothesis that states there is no difference or effect, serving as the default assumption to test against in statistical hypothesis testing.

Alternative Hypothesis

A statistical hypothesis that proposes a difference or effect, contrasting the null hypothesis.